Can employees exercise control over managers? The role of the employees’ knowledge of manager behavior and manager discretion

• Main Author: Yin, Huaxiang
• Other Authors: College of Business (Nanyang Business School)
• Format: Article
• Language: English
• Published: 2021
• Subjects: Business::Accounting; Indirect Reciprocity; Employee-based Control; Information Policies; Discretion; Manager Type
• Online Access: https://hdl.handle.net/10356/152668
• Institution: Nanyang Technological University

I investigate whether organizations can use the "power of the employee" to reduce managers' opportunistic behavior toward others. I predict that revealing this behavior to employees makes managers less inclined to act opportunistically. Employees' knowledge has a stronger impact on reducing managers' opportunistic behavior when managers have discretion over employee rewards versus when they do not. I further predict that the effect of employee-based control depends on whether managers are other-interested versus self-interested. Revealing manager actions alone is sufficient to reduce other-interested managers' opportunism, even when they lack discretion over employee rewards. Revealing manager actions alone has no discernible influence on self-interested managers' opportunism, but pairing this action with granting them discretion over employee compensation does reduce their opportunism. Results of two experiments support my predictions, and these results have important implications. By relying on the power of the employee, organizations can induce (even selfish) managers to act less opportunistically.